Amfac Mechanical Supply Co. v. Federer

• Citation: 645 P.2d 73
• Decision Date: 21 May 1982
• Docket Number: No. 5646,5646
• Parties: AMFAC MECHANICAL SUPPLY CO., Appellant (Plaintiff), v. Carl FEDERER and Beverly Federer, Appellees (Defendants).
• Court: United States State Supreme Court of Wyoming

Page 73

645 P.2d 73

AMFAC MECHANICAL SUPPLY CO., Appellant (Plaintiff), v. Carl FEDERER and Beverly Federer, Appellees (Defendants).

No. 5646.

Supreme Court of Wyoming.

May 21, 1982.

Bernard Q. Phelan of Graves, Hacker & Phelan, P. C., Cheyenne, for appellant.

John W. Pattno of Pattno & Smith, Cheyenne, for appellees.

Before ROSE, C. J., and RAPER, THOMAS, ROONEY and BROWN, JJ.

RAPER, Justice.

Amfac Mechanical Supply Company (appellant), in order to collect an unpaid account owed by C & B Plumbing and Heating, Inc. (C & B), in the amount of approximately $11,000, sued Carl and Beverly Federer (appellees) to pierce the corporate veil and reach the personal assets of appellees. At the end of the appellant's case in a nonjury trial, the trial judge, after briefs had been submitted, granted appellees' motion to dismiss. In his letter opinion the judge expressed his view that appellant had failed to prove a prima facie case because it did not "show that the corporation was organized or used to mislead creditors or to perpetrate fraud upon them." On appeal, appellant argues:

1. Proof of fraud or bad faith is not a prerequisite in a case to "pierce the corporate veil."

2. Appellant offered sufficient evidence to prove a prima facie case.

We will reverse and remand with directions to vacate the judgment entered for appellees and proceed with the trial.

The appellant on June 16, 1981, filed a complaint against appellees alleging that the latter were the sole owners of C & B, a corporation. The complaint went on to allege that the corporation was organized by the appellees as their alter ego for the purposes of performing plumbing and heating construction contracts under a corporate guise and that the corporation was a sham. It was further claimed that appellant had sued C & B and taken a default judgment in the sum of $11,497.09, plus attorney's fees of $180.00 and costs in the amount of $27.50, totaling $11,704.59 with interest at the statutory rate from August 7, 1980. Personal judgment against appellees was prayed for. Appellees admitted corporate existence of C & B but denied the other allegations and personal liability.

Before embarking upon a disposition of this appeal, it is necessary to lay down the ground rules pertaining to review of proceedings in the trial court where at the close of the plaintiff's evidence, a motion to dismiss was granted. In Kure v. Chevrolet Motor Division, Wyo., 581 P.2d 603 (1978), this court set out at some length the various rules and principles involved in making such an early trial disposition of a nonjury case. Rule 41(b)(1), W.R.C.P.:

"(1) * * * After the plaintiff, in an action tried by the court without a jury, has completed the presentation of his evidence, the defendant, without waiving his right to offer evidence in the event the motion is not granted, may move for a dismissal on the ground that upon the facts and the law the plaintiff has shown no right to relief. The court as trier of the facts may then determine them and render judgment against the plaintiff or may decline to render any judgment until the close of all the evidence. If the court renders judgment on the merits against the plaintiff, the court shall make findings as provided in Rule 52(a). Unless the court in its order for dismissal otherwise specifies, a dismissal under this subdivision and any dismissal not provided for in this rule, other than a dismissal for lack of jurisdiction, for improper venue, or for failure to join a party under Rule 19, operates as an adjudication upon the merits."

The trial judge in this case signed a judgment adjudicating the case on its merits.

In Kure, after reviewing precedent, this court set out an approved approach to be used by a trial judge in considering such a motion, which we follow. When plaintiff's proof fails in some aspect, the motion must be granted. When plaintiff's evidence is overpowering, the trial judge's work is easy and the motion should be denied. When the plaintiff has presented only a prima facie case founded on unimpeached evidence, the district judge should not grant the motion, even though he sits in the stead of a jury as the trier of facts and may not feel at the juncture of the trial that plaintiff has sustained his proof burden. When, in the latter position, the trial judge should accept the rule's alternative whereby he "may decline to render any judgment until the close of all the evidence" and deny the motion. ¹

In our review of the trial court's judgment we are provided a guide by Rule 41(b)(1), supra, in that it requires the trial judge to make findings as provided in Rule 52(a), W.R.C.P., when a motion to dismiss is granted. Rule 52(a) permits the court to do so by its written memorandum. Here, the court took the case under advisement and issued a letter opinion which incorporated its findings and constituted compliance with Rule 41(b)(1). Kure further tells us that the evidence must be considered in the light most favorable to the plaintiff but we may freely review the trial court's conclusions of law.

A motion to dismiss at the close of plaintiff's case should not be granted unless upon any issue there can be said to be in support thereof no evidence and no substantial inferences. African Metals Corporation v. Bullowa, 288 N.Y. 78, 41 N.E.2d 466 (1942), reh. denied 288 N.Y. 673, 43 N.E.2d 75. This case is cited at this point for the reason that it involves piercing of the corporate veil. The trial court had dismissed the plaintiff's complaint against individual shareholders on the ground that the transaction at issue was corporate and no personal liability resulted. The New York Court of Appeals acknowledged that the law permitted individuals to incorporate their business in order to escape personal liability. But, the incorporation was not available as a means of exempting the individuals from liability for an enterprise actually carried on by the individuals independent of the corporate structure. For example, the corporation's profits must have been available to meet corporate liabilities before the individuals were entitled to a share. A corporation was created for the legitimate convenience of the stockholders, not as a mere mask for the individuals' personal acts and responsibilities. When the corporation was treated by the owners as their alter ego, the New York court ruled that courts should ignore the corporate structure and make the stockholders liable for the corporate debts. The appeals court held that there was a prima facie case made out by plaintiff's evidence indicating that those corporate principles applied, and then remanded for a new trial. A similar state of facts exists in the case now before us and the motion to dismiss should not have been granted in that a prima facie case for appellant was made.

In the trial judge's letter opinion certain facts of the case were discussed:

"The defendants formed a corporation known as C & B Plumbing and Heating, Inc. in February of 1977. A certificate of incorporation was issued and the defendants became the sole stockholders as shown by the corporate stock transfer record, and were directors and the officers of said corporation. The corporation also had a seal, minutes of its organization meeting and bylaws of the corporation all appear in the corporate minute book. It was testified that the organizational meeting was held and the bylaws were in fact adopted. Further, the testimony was that other meetings were held although the corporate minute book did not reflect further meetings after the organizational meeting.

"The corporation carried on the business of plumbing and heating work for approximately a year and the testimony was that it became indebted to the plaintiff in the approximate sum of $11,000.00, after which time the plaintiff refused to extend further credit to the corporation, but continued to sell to the corporation on a cash basis. The facts further indicate that the individual defendants borrowed $50,000.00 from Equality State Bank, for the purpose of providing operating capital to the corporation. The defendants individually signed and guaranteed this note and continued to make payments on it individually after the corporation had made payments totalling approximately $27,000.00, being first applied to interest and then to principal. The testimony is that the individual defendants still owe approximately $32,000.00 to the Equality State Bank on this note which they are paying individually, and the testimony is uncontroverted that the entire proceeds of the $50,000.00 loan went into the corporation.

"The Court further finds in this case that the plaintiff dealt with the corporation, knowing it to be a corporation in this case and then eventually withheld further credit from the corporation and dealt with it only on a cash on delivery basis.

"The Court in the present case does find that the corporation had a genuine corporate existence, that it was not operated as the alter ego for the individual defendants for their personal benefit and advantage, other than those advantages and benefits that are specifically and legitimately permitted to corporate entities, i.e., lack of personal liability for corporate actions, etc. The Court further finds that there was no evidence to show that the individual defendants in the corporation had, intentionally, intermingled any personal and financial affairs, even though the individual defendants did exercise control over the corporation and were the owners of all of the stock of the corporation, as well as being president and secretary-treasurer, and directors. The only asset which the Court finds from the evidence which was purchased by the corporation but titled in the name of the individual defendant, Carl Federer, was a new vehicle. From the testimony and evidence, the Court finds that this was an oversight in the invoicing and titling of the vehicle, and not the deliberate attempt to defraud...